Vistaprint Q4 Earnings and Profit Beat Forecast

Friday, August 02, 2013

Press release from the issuing company

VENLO, the Netherlands - Vistaprint N.V., a leading online provider of professional marketing products and services to micro businesses and the home, today announced financial results for the fourth quarter and fiscal year ended June 30, 2013.

“Fiscal year 2013 was a year with mixed financial results,” said Robert Keane, president and chief executive officer. “Our total revenue performance was disappointing relative to our expectations twelve months ago. Though our revenue growth in North America was strong with good execution of our strategic and financial objectives, our growth in Europe and Australia was weaker than expected. Moving to earnings, we were pleased with our higher than anticipated bottom-line performance for the year. This was due in part to actions we took throughout the year to improve advertising efficiency and moderate our expense growth in reaction to our lower revenue growth, reflecting our commitment to achieving our annual earnings target.”

Keane continued, “Our progress against the strategic initiatives set forth two years ago is also mixed. We are executing well in manufacturing globally, as well as advertising and customer value proposition improvements in North America. In Europe andAustralia, our revenue growth has been weak, although we are encouraged by recent signs of stabilization. Finally, we are making good progress with our investments in longer-term growth initiatives including new markets in Asia as well as with Webs and Albumprinter, and we continue to be enthusiastic about the potential long-term value of these initiatives.”

Revenue for the fourth quarter of fiscal year 2013 grew to $280.1 million, a 12 percent increase over revenue of $250.4 million reported in the same quarter a year ago. Excluding Albumprinter and Webs combined revenue of $18.6 million, total fourth quarter revenue was $261.5 million. For the full fiscal year, revenue grew to $1,167.5 million, a 14 percent increase over revenue of $1,020.3 million in fiscal year 2012. Excluding the estimated impact from currency exchange rate fluctuations and revenue from acquired businesses, total revenue grew 11 percent year over year in the fourth quarter and 12 percent for the full year.

Gross margin (revenue minus the cost of revenue as a percent of total revenue) in the fourth quarter was 64.6 percent, flat versus the same quarter a year ago. For the full fiscal year, gross margin was 65.7 percent, compared to 65.2 percent in fiscal year 2012.

Operating income in the fourth quarter was $3.1 million, or 1.1 percent of revenue, and reflected a 39 percent decrease compared to operating income of $5.1 million, or 2.0 percent of revenue, in the same quarter a year ago. For the full fiscal year, operating income was $46.1 million, or 4.0 percent of revenue, a 16 percent decrease compared to operating income of$55.2 million, or 5.4 percent of revenue, in the prior fiscal year.

GAAP net income for the fourth quarter was $2.3 million, or 0.8 percent of revenue, representing a 41 percent decrease compared to $3.9 million, or 1.5 percent of revenue in the same quarter a year ago. For the full fiscal year, GAAP net income was $29.4 million, or 2.5 percent of revenue, a 33 percent decrease compared to GAAP net income of $44.0 million, or 4.3 percent of revenue, in the prior fiscal year.

GAAP net income per diluted share for the fourth quarter was $0.07, versus $0.10 in the same quarter a year ago. For the full fiscal year, GAAP net income per diluted share was $0.85, versus $1.13 in the prior full fiscal year. This decline in earnings was influenced by a mix of our planned strategic investments, dilutive acquisitions made during fiscal 2012, our fiscal 2013 minority investment in China, and higher share-based compensation expense for our named executive officers due to our recent move to more performance-based stock option grants. These effects were partially offset by lower share count as a result of recent purchases of our ordinary shares.

Non-GAAP adjusted net income for the fourth quarter, which excludes amortization expense for acquisition-related intangible assets, tax charges related to the alignment of acquisition-related intellectual property with global operations, and share-based compensation expense and its related tax effect, was $14.1 million, or 5.0 percent of revenue, representing a 5 percent decrease compared to non-GAAP adjusted net income of $14.9 million, or 5.9 percent of revenue, in the same quarter a year ago. For the full fiscal year, non-GAAP adjusted net income was $75.8 million, or 6.5 percent of revenue, a 1 percent decrease compared to non-GAAP adjusted net income of $77.0 million, or 7.6 percent of revenue, in the prior fiscal year.

Non-GAAP adjusted net income per diluted share for the fourth quarter, as defined above, was $0.41, versus $0.40 in the same quarter a year ago. For the 2013 full fiscal year, non-GAAP adjusted net income per diluted share was $2.15, versus$1.95 in the prior fiscal year.

Capital expenditures in the fourth quarter were $12.5 million or 4.5 percent of revenue. During the full fiscal year capital expenditures were $79.0 million or 6.8 percent of revenue.

During the fourth quarter, the company generated $37.0 million of cash from operations and $21.8 million in free cash flow, defined as cash from operations less purchases of property, plant and equipment, purchases of intangible assets not related to acquisitions, and capitalization of software and website development costs. During the full fiscal year, the company generated $140.0 million of cash from operations and $52.6 million in free cash flow.

As of June 30, 2013, the company had $50.1 million in cash and cash equivalents and $238.8 million in short-term and long-term debt. After considering debt covenant limitations, the company had $228.6 million available for borrowing under its credit facility as of June 30, 2013.

During the fourth quarter, the company purchased 613,000 of its ordinary shares for $23.4 million, inclusive of transaction costs, at an average per-share cost of $38.12, as part of the share repurchase program authorized by the Supervisory Board in February 2013.

Operating metrics are now provided as a table-based supplement to this press release.

Fiscal 2014 Outlook as of August 1, 2013:

Ernst Teunissen, executive vice president and chief financial officer, said, “Two years ago, we presented a plan that anticipated a ramp in the profitability of our organic business in fiscal 2014 after two significant years of investment in fiscal 2012 and 2013. We believe we are on track to deliver this in fiscal 2014, notwithstanding our more modest revenue growth expectations. We also expect to deliver improved profitability on a consolidated basis, including the combined negative impact of our acquisitions of Webs and Albumprinter, our investments in Asia, and the incremental accounting impact driven by our move to more performance-based executive stock option grants in 2012. We expect to deliver fiscal 2014 margin leverage via multiple income statement line items as a percent of revenue, including gross profit, advertising expense and general and administrative expenses, consistent with our plan presented two years ago.”

Teunissen continued, “Moving to revenue expectations, the fiscal 2014 guidance we are introducing today includes a range of constant-currency revenue growth of 7 percent to 11 percent. We have made important changes to our marketing organization and processes in Europe, but expect flat growth there from fiscal 2013 to fiscal 2014. This is a strategic choice to improve the marketing foundations, customer value proposition and customer economics in our top European markets before resuming more substantial advertising spend.”

Financial Guidance as of August 1, 2013:

As previously stated, beginning with fiscal year 2014, the company is providing revenue and earnings guidance on an annual basis. Based on current and anticipated levels of demand, the company expects the following financial results:

Fiscal Year 2014 Revenue

For the full fiscal year ending June 30, 2014, the company expects revenue of approximately $1,235 million to $1,285 million, or 6 percent to 10 percent growth year over year in reported terms. Excluding currency movements, we expect constant-currency growth of approximately 7 percent to 11 percent. Constant-currency growth expectations assume a recent 30-day currency exchange rate for all currencies.

Fiscal Year 2014 GAAP Net Income Per Diluted Share

For the full fiscal year ending June 30, 2014, the company expects GAAP net income per diluted share of approximately$1.35 to $1.70, which assumes 34.4 million weighted average diluted shares outstanding.

Fiscal Year 2014 Non-GAAP Adjusted Net Income Per Diluted Share

For the full fiscal year ending June 30, 2014, the company expects non-GAAP adjusted net income per diluted share of approximately $2.49 to $2.83, which excludes expected acquisition-related amortization of intangible assets of approximately$8.7 million or approximately $0.25 per diluted share, share-based compensation expense and its related tax effect of approximately $29.5 million or approximately $0.84 per diluted share, and tax charges related to the alignment of acquisition-related intellectual property with global operations of approximately $2.3 million, or $0.07 per diluted share. This guidance assumes a non-GAAP weighted average diluted share count of approximately 35.0 million shares.

Fiscal Year 2014 Capital Expenditures

For the full fiscal year ending June 30, 2014, the company expects to make capital expenditures of approximately $85 million to $100 million. Planned capital investments are designed to support the planned growth of the business and will include various investments in new manufacturing capabilities.

The foregoing guidance supersedes any guidance previously issued by the company. All such previous guidance should no longer be relied upon.